PacTel Leaves Dividend Alone / But a cut could come later this year

Published 4:00 am, Saturday, March 23, 1996

Throwing Wall Street for a loop, Pacific Telesis' board decided yesterday to maintain its annual dividend of $2.18 per share -- the most generous of any Baby Bell -- at least for now.

But it held out the possibility of a change later this year, saying: "The board will continually evaluate the dividend in light of changing industry, regulatory and competitive developments." The next possibility for a cut comes in June. The decision came after a thorough discussion during a three- hour board meeting in San Francisco.

Wall Street analysts have been predicting PacTel would be the first Baby Bell to cut its dividend, pushing the stock down about 25 percent from a high of $35.25 in January. They cited the company's slow earnings growth, absence of cellular earnings, earnings dilution from expansion, a high debt ratio, and the need to increase capital spending.

PacTel's earnings have stagnated for seven years. On Thursday Moody's Investors Service placed PacTel's debt rating under review for possible downgrade, citing concerns about the company's financing needs.

LATEST BUSINESS VIDEOS

Is This the End of Candy Hearts? America's 'Oldest' Candy Company Could CloseBuzz 60

Nike to Investigate Workplace Behavior, Announces President will ResignWibbitz

Goodyear Presents New Tire Technology Designed for Electric VehiclesAutomotoTV

This Is The Best Restaurant Chain in AmericaBuzz 60

The First Synthetic Plastic Was RevolutionaryTimeline

President Trump Just Killed Broadcom’s Proposed Takeover of QualcommFortune

The 1950s Single Mom Who Redesigned American Car InteriorsTimeline

Millennial Habits May Soon Bring An End to Passwords New Study ShowsVeuer

"We were surprised the board didn't vote to cut the dividend," said Joanne Smith, analyst for Prudential Securities. "We felt it would have been prudent."

Here's why PacTel can afford to stay the course, at least for now: PacTel recently sold $500 million in preferred securities to repay short-term debt; in September the company said it would cut $1 billion over five years from its so-called "information superhighway"; and it is seeking a $214 million increase in some phone charges from state regulators to offset revenue lost to competition.